Memorandum of Association

What you should know :

3.1 Meaning and Definition

3.2 Purpose of Memorandum of Association.

3.3 Form of Memorandum of Association

3.4 Contents of Memorandum

3.5 Doctrine of Ultra Vires

3.6 Changes in MOA

3.1 Meaning and Definition
Definition: According to sec. 2(28) of the
Companies Act, memorandum of association
means “the memorandum of association of a
company as originally framed or as altered from
time to time”.
3.2 Purpose
The purpose of memorandum is two-fold:
First, to enable the prospective investors to know the
purpose for which their money is going to be used
and what risk they are taking in making the
investment.
The second, to inform the outsiders dealing with the
company as to what is its permitted range of
activities in which it may lawfully engage.
3.3 Form of Memorandum of Association
As per section 15 of the Companies Act, the
memorandum of association should be
- printed,
- divided into paragraphs numbered
consecutively and,
- signed by seven (two in case of a private
company) subscribers in the presence of at
least one witness.
3.4 Contents of Memorandum
The basic conditions, as per section 13 are as follows :-
A. Name Clause
B. Situation Clause (Domicile clause or Registered office
clause)
C. The objects clause of the memorandum of association
of a company is split up as follows:
i) main objects of the company,
ii) objects incidental or ancillary
to the attainment of main object, &
iii) any other objects.
D. Liability Clause
E. The Capital Clause
F. Subscription Clause
3.5 Doctrine of Ultra Vires
The word ‘ultra’ means beyond and the word
‘vires’ means the powers. Ultra vires, therefore,
means beyond the powers. Any act beyond the
objects stated in the memorandum is ultra vires
the company and thus void.

Effects of ultra vires transactions:

- Ultra vires contracts are void ab initio
- Injunction:
- Personal liability of Director :
3.6 Alteration of Memorandum of
Association
I. Change of name: Section 21 provides that the name of a
company may be changed at any time by passing a special
resolution at a general meeting of the company and with the
written approval of the Central Government.
Procedure for change of Name:

- For changing the name, the company is required to apply to

ROC in Form 1A to ascertain the availability of name
- After the approval of the new name convene a general
meeting of the company. A special resolution shall specify
that the old name is being change to the new name.
- After passing the special resolution, company shall file Form
No. 23 with a copy of special resolution, within 30 days
- Apply to ROC for obtaining the approval of change of name
and obtain fresh certificate of registration.

The change of name does not effect any legal right or liabilities.
Legal proceeding commenced under old name will continue
under new name.
Direction to change name:
If through inadvertence or otherwise, a company has been
registered with a name which is identical with or too closely
resembles the name of an existing company, or a registered
trademarks.

A) The rectification of the name must be carried out if the

Central Government so direct within a period of 12 months
from the date of registration of the company. The direction of
the Central Government is required to be complied with within
period of three months from the date thereof.
Direction to change name:
(cont..)
B) The Company may also on its own, change its name by
passing an ordinary resolution and by obtaining the approval of
the Central Government in writing:

- Any default in complying with the direction of the Central

Government renders the company and its officer in default
liable for punishment with fine, which may extent to Rs.
1000 for every day during with the default continues.

- The Registrar will enter the new name of the register in

place of the old name and shall issue a fresh certificate of
incorporation with necessary alterations

- The change of name becomes effective on the issue of fresh

certificate of incorporation.
Change of Registered Office:
Since the situation clause in the memorandum does not
contain the exact location or city address of the company,
the need for alteration in the registered office clause will
arise only when the registered office shifted from one state
to another

A) Within the same City

B) Within the same State
- Within the jurisdiction of the existing RoC
in the same state
- Within the jurisdiction of another RoC
in the same state
C) From one State to another State
Change of Registered Office from
One Premises to another premises in
the same city:
- Pass a resolution in the meeting of board of directors
for change of registered office within the same city.
- File e-Form No. 18 within 30 days of shifting the
registered office. The notice in e-form No. 18 shall
contain the fact of change of registered office and complete
address of new registered office
Change of Registered Office from One
Town to Another town and within the
jurisdiction of existing ROC in the same
state:
In this case, the following procedure is to be followed:
- Pass a special resolution at a general meeting of the
shareholders;
- File a copy of the special resolution with the Registrar
within 30 days of the passing of Special resolution in
Form No. 23;
- Within 30 days of the shifting of the registered office, give
the notice of the new location to the Registrar in
Form No. 18 who shall record the same.
Change of Registered Office from One Town
to Another town in the same state and within
the Jurisdiction of another RoC:
If a company wants to change the place of its registered office
from jurisdiction of one RoC to jurisdiction of another RoC
within the same State, it needs to go through the following
procedure:
- Special Resolution Convene the General Meeting for
approving the change in the Registered office from
jurisdiction of one RoC to jurisdiction of another RoC within the
same State. File Form 23
- Obtain confirmation from Regional Director: Make an
application in the prescribed form to the Regional Director for
confirmation.. The confirmation or otherwise shall be
communicated to the company within four weeks from the
date of receipt of application for such change.
 Cont……
- Filing of confirmation with RoC. File a certified copy of the
confirmation by the Regional Director for change of its
registered office, within two months from the date of
confirmation, together with a printed copy of the
memorandum as altered with the Registrar.
- Registration: The Registrar shall register the same and
certify the registration under his hand within one month
from the date of filing of such document. The certificate
shall be conclusive evidence that all the requirements of this
Act with respect to the alteration and confirmation have
been complied with and henceforth the memorandum as
altered shall be the memorandum of the company.
- Give notice of new location to RoC in Form No. 18 within 30
days of change in registered office.
Change of Registered Office from one state to
another state:
A) Grounds for shifting. A company can shift its registered
office from one State to another for certain purposes only as
specified in sec. 17(1). These are :
- To carry on its business more economically and more efficiently
[Section 17(1)(a)].
- To attain its main purpose by new or improved means
[ Sec.17(1)(b)]
- To enlarge or change the local area of its operation [Sec.17(1)(c)]
- To carry on some business which under existing circumstances may
be conveniently or advantageously combined with the business of
the company [Sec. 17(1)(d)]
- To restrict or abandon any of the objects specified in the
memorandum [Sec.17(1)(e)]
- To sell or dispose of the whole or any part of the
undertaking [Sec.17(1)(f)].
- To amalgamate with any other company or body of
persons [Sec.17(1)(g)].
 Cont……

B) Special Resolution. Registered office of a company can be

shifted from one State to another by passing special
resolution in the general meeting of shareholders. Form 23.
should be filed for registering the special resolution.

C) Confirmation by the Company Law Board. The company

should file a petition to the Company Law Board for
confirmation of the change.
 Cont……
D) Notice to affected parties. Before confirming the change, the
Company Law Board will satisfy itself that sufficient notice
has been given to -
- every creditor and all other persons whose interests are
likely to be affected by the alteration including
- the Registrar of Companies and the
- Government of the State in which the registered office is
situated.

Also, the Company Law Board will give an opportunity to

members and creditors of the company, the Registrar and other
persons interested in the company to be heard.
E) Copy of the CLB order to be filed with ROC. The CLB may
confirm the alteration and may impose such terms and
conditions as it may deem fit .The company shall file with
Registrar of each State – (The State where it was registered
and the new state)
- A certified copy of the CLB order within three months
from the date of such order .
- Copy of memorandum as altered.
If it is not filed within the prescribed time, then the alteration
shall, at the expiry of such period, become void and
inoperative. However the CLB may grand extension of time
for filing upto 3 months.
- The Registrar shall register the change and give a certificate of
registration within 1 month from date of filing of such
documents.
A notice in Form No 18 of the new location of the registered
office must be given to the Registrar of the State to which the
office has been shifted, within thirty days after the change of the
office (Sec. 146).
Procedure to Change the Object Clause:
A) Grounds for shifting. A company can shift its registered
office from one State to another for certain purposes only as
specified in sec. 17(1). These are :
- To carry on its business more economically and more efficiently
[Section 17(1)(a)].
- To attain its main purpose by new or improved means
[ Sec.17(1)(b)]
- To enlarge or change the local area of its operation [Sec.17(1)(c)]
- To carry on some business which under existing circumstances may
be conveniently or advantageously combined with the business of
the company [Sec. 17(1)(d)]
- To restrict or abandon any of the objects specified in the
memorandum [Sec.17(1)(e)]
- To sell or dispose of the whole or any part of the
undertaking [Sec.17(1)(f)].
- To amalgamate with any other company or body of
persons [Sec.17(1)(g)].
 Cont……
B) Special Resolution. The company should pass a special
resolution in the general meeting of shareholders for changing
the objects clause. Section 18 provides that a special
resolution passed by the company in relation to clauses
(a) to (g) of sub-section (1) of section 17 shall be filed by the
company with the Registrar within one month of the date of
such resolution, together with a printed copy of the
memorandum as altered.
C) ROC to certify the Registration. The Registrar will register
the documents and issue, within one month, a certificate
which will be conclusive evidence that all the requirements of
the Act, with respect to the alteration of the objects clause in
the memorandum has been complied with (section 18). If the
required documents are not filed within the prescribed
time, the alteration shall, at the expiry of such period, become
void and inoperative (Sec. 19).
Procedure for Alteration of Liability Clause:
- The liability of a member of a company cannot be increased
unless the members agrees in writing (Sec 38).
- Section 32 permits an unlimited company to register as a
limited company. On alteration, the Registrar shall close the
former registration of the company and the new registration
shall take effect as if it were the first registration. The
registration of an unlimited company as a limited company
shall not, however, affect any debts, liabilities, obligations or
contracts incurred or entered into, before the conversion.
 Cont……
Can the liability of the directors be made unlimited in a limited
company?

If the articles of a limited company so authorize, the liability

clause in its memorandum of association may by a special
resolution, be altered making the liability of all of its directors,
or of any director or manager, unlimited. Such an alteration
however, shall not affect the liability of any existing director or
manager before the expiry of his present term of office, unless
he gives his consent to making his liability unlimited
(Section 323).
Procedure for Alteration of
Capital Clause:
These alterations can be done by passing an ordinary
resolution, if authorised by the articles (Sec. 94). Alteration of
capital clause may involve the following types of alterations –

A) Increase of authorised share capital - A company, limited

by shares, if the articles authorise, can increase its
authorised share capital by passing an ordinary resolution.
B) Consolidation and sub-division of shares - Consolidation is
the process of combining shares of smaller denomination.
For instance, 10 shares of Rs. 10 each may be consolidated
into one share of Rs. 100. Sub-division of shares is just the
opposite of consolidation e.g., one share of Rs. 100 may be
dividend into 10 shares of Rs. 10 each.
 Cont……
C) Conversion of shares into stock and vice versa - Section 94
empowers a company to convert its fully paid-up shares
into stock by passing a resolution in general meeting, if its
articles authorise such conversion. A notice is to be filed
with the Registrar within thirty days of the passing of the
resolution specifying the shares so converted.

When shares are converted into stock, the shareholders are

issued stock certificates. In the Register of Members, the
amount of stock is written against the name of a particular
member in place of number of shares. The stockholder is as
much a member of the company as a shareholder.
 Cont……
D) Diminution of share capital - Sometimes, it so happens that
shares are issued, but are not taken up by the members of
the public and, therefore, not allotted. Section 94(1)(e)
provides that a company may, if its articles authorise, by
resolution in general meeting, cancel shares which have not
been taken or agreed to be taken by any person and diminish
the amount of the share capital by the amount of the
shares so cancelled. This constitutes diminution of capital
and it does not amount to reduction of capital.
Procedure for Alteration of
Capital Clause:

- The articles should authorize the alteration of capital clause

- The company must pass an ordinary resolution
- Notice of alteration must be given to the RoC within 30 days
of alteration in Form No. 5